Comptroller General 

of the United States 

United States General Accounting Office 

Washington, DC 20548 

October 3, 2003 

The Honorable George V. Voinovich 

Chairman 

The Honorable Richard J. Durbin 

Ranking Member 

Subcommittee on Oversight of Government Management, 

the Federal Workforce, and the District of Columbia 

Committee on Governmental Affairs 

United States Senate 

Subject: Questions for Competitive Sourcing Hearing Record 

It was a pleasure to appear before the subcommittee on July 24, 2003, to discuss 

various competitive sourcing issues, including the recent revisions made by the 

Office of Management and Budget (OMB) to its Circular A-76. This letter responds to 

your request for my views on the following questions for the record: 

Q. The revised OMB Circular A-76 makes “best value” instead of “lowest 

cost” the factor that agencies must use in determining who will win a 

public-private competition. Some have alleged that this change is simply 

an effort to ensure that more private contractors win competitions. How 

do you see agencies benefiting from the change? How much of a factor do 

you see cost playing in determining which bidder is offering an agency the 

“best value?” 

For many years, federal agencies conducting negotiated procurements under the 

Federal Acquisition Regulation (FAR) routinely have traded off cost and non-cost 

factors in making contract award decisions. The tradeoff process is often called 

“best value.” Among the most common non-cost factors, all of which are required to 

be identified in the solicitation, are the contractor’s technical approach, past 

performance, and management plan. Tradeoffs reflect a widespread practice used by 

other governments (state, local, and foreign) as well as by the private sector. 

The tradeoff process moves the federal government past the “low bid” mentality of 

the past, with increasing consideration of factors such as quality and past 

performance. It entrusts federal employees acting as source selection officials with 

the authority to use their judgment in selecting among proposals offered. While 

concern sometimes has been expressed that the tradeoff process allows source 

selection officials very broad discretion, that discretion has boundaries. An award 

decision must comply with pre-established evaluation criteria, and is subject to 

challenge if it appears it did not. In this regard, GAO considers bid protests 

GAO-04-155R Competitive Sourcing 
challenging the way tradeoffs are conducted, and sustains protests where the process 

was unfair, unreasonable, or inconsistent with the terms of a solicitation. 

The previous version of OMB Circular A-76 allowed the use of a “best value” tradeoff 

selection process among private-sector proposals. The process created in the March 

1996 revisions to the Circular A-76 Supplemental Handbook endeavored to capture 

the benefits of the tradeoff process, while maintaining the perceived objectivity of a 

cost-only selection. 

Under the new Circular A-76 issued in May, federal agencies will be able to use 

tradeoffs only under certain conditions. Under the terms of the new Circular, a 

tradeoff source selection is allowed in a standard competition for (a) information 

technology activities, (b) commercial activities performed by a private sector source, 

(c) new requirements, or (d) certain expansions of current work. An agency also may 

use a tradeoff source selection process for a specific standard competition if, prior to 

the public announcement of the competition, the agency’s Competitive Sourcing 

Official approves use of the process in writing and notifies OMB. 

The extent to which cost in tradeoff decisions will be a significant factor under the 

new Circular is unknown. But while the role of cost is important it must be balanced 

with the government’s ability to obtain the technical capability and quality it needs to 

meet mission requirements. As I testified before the Subcommittee, although cost is 

important, it is not everything. 

Q. Part of the administration’s goal in revising A-76 was to increase the 

amount of work submitted to public-private competition. If that happens, 

are agencies capable of effectively managing competitions and overseeing 

contracts? If not, what level of resources will we need to dedicate to 

bolstering agency contracting offices? Should that effort have come 

before we revised A-76? 

Agencies will face significant challenges in managing their competitive sourcing 

programs, and will be doing so while addressing high-risk areas, such as human 

capital and contract management. In this regard, GAO has listed contract 

management at the National Aeronautics and Space Administration and the 

Departments of Housing and Urban Development, Defense and Energy as high-risk 

areas. With a likely increase in the number of public-private competitions and the 

requirement to hold accountable whichever sector wins, agencies will need to ensure 

that they have an acquisition workforce sufficient in numbers and abilities to 

administer and oversee these arrangements effectively. 

Conducting fair, effective and efficient competitions requires sufficient agency 

capacity—that is, a skilled workforce and adequate infrastructure and funding. 

Agencies will need to build and maintain capacity to manage competitions, to prepare 

the in-house most effective organization (MEO), and to oversee the work—regardless 

of whether the private sector or the MEO is selected. While the level of resources 

needed will vary among the agencies, building and maintaining this capacity will 

likely be a challenge for many agencies, particularly those that have not been heavily 

invested in competitive sourcing previously. As I mentioned during the hearing, 

Page 2 GAO-04-155R Competitive Sourcing 
establishing a government-wide fund at OMB that agencies could access based on a 

sound business case would help to assure that the new process is both efficient and 

fair. 

Q. The administration has said in the past that the 12-month time limit 

placed on competitions in the revised OMB Circular A-76 should be 

sufficient if agencies plan properly before the competition begins. 

However, most competitions conducted under the old rules took much 

longer than 12 months, often twice as long. Do you think the time limits 

are appropriate? In your estimation, how much of the time taken to 

conduct competitions in the past was used to do things that you believe 

could be handled before the competition begins? 

A major challenge agencies will face will be meeting the 12-month limit for 

completing the standard competition process in the new Circular. This provision is 

intended to respond to complaints from all sides about the length of time historically 

taken to conduct A-76 cost comparisons—complaints that the Commercial Activities 

Panel repeatedly heard in the course of its review. OMB’s new Circular states that 

standard competitions shall not exceed 12 months from the public announcement 

(start date) to performance decision (end date). Under certain conditions, there may 

be extensions of no more than 6 months. The new Circular also states that agencies 

shall complete certain preliminary planning steps before a pubic announcement. 

These steps are: 

(1) Determining the activities and full time equivalent (FTE) positions to be 

competed. 

(2) Conducting preliminary research to determine the appropriate grouping of 

activities as business units to be consistent with market and industry 

structures. 

(3) Assessing the availability of workload data and data collection systems. 

(4) Determining the activity baseline costs as performed by the incumbent. 

(5) Determining whether a streamlined or standard competition will be used. 

(6) Developing preliminary competition and completion schedules. 

(7) Determining the roles, responsibilities, and availability of participants in the 

process. 

(8) Appointing competition officials (agency tender official, contracting officer, 

performance work statement team leader, human resource advisor and source 

selection authority). 

(9) Informing any incumbent service providers of the date of the public 

announcement. 

We welcome efforts to reduce the time required to complete these studies. Even so, 

our studies of competitive sourcing at the Department of Defense (DOD) have found 

that competitions can take much longer than the time frames outlined in the new 

Circular. Specifically, recent DOD data indicate that competitions take on average 25 

months. It is not clear how much of this time was needed for any planning activities 

that may now be done outside the revised Circular’s 12-month time frame. It appears, 

however, that a significant amount of the process—developing the performance work 

statement, preparing the agency tender offer and most efficient organization, and 

Page 3 GAO-04-155R Competitive Sourcing 
conducting the source selection process—still needs to be done within the 12-month 

time limit. 

In commenting on OMB’s November 2002 draft proposal, we recommended that the 

time frame be extended to perhaps 15 to 18 months overall, and that OMB ensure that 

agencies provide sufficient resources to comply with the Circular. As such, we 

believe that additional financial and technical support and incentives will be needed 

for agencies as they attempt to meet the ambitious 12-month time frame. In this 

regard, we believe that implementation of the government-wide fund approach noted 

in my response to the prior question would help to assure that the needed resources 

are available. 

I look forward to working with you on these and other issues in the future. If you 

have any further questions or would like to discuss any of the issues in more detail, 

please call me at (202) 512-5500; or Bill Woods, Director, Acquisition and Sourcing 

Management at (202) 512-8214. 

Sincerely yours, 

David M. Walker 

Comptroller General 

of the United States 

(120285) 


Page 4 GAO-04-155R Competitive Sourcing 
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